Trade and Customs Policy

Lord Price Excerpts

Tuesday 5th December 2017 Lords Chamber

[Lord Price (Con)]

My Lords, as this is the first time that I have spoken in your Lordships’ House since I stepped down as the Minister for Trade Policy, I will start by congratulating the Minister on her appointment and wish her every success. I also thank the dedicated, hard-working and extremely able civil servants who supported me during my time in office, in particular Rob Cook and latterly Matt Fry, who ran my private office, and the senior team in trade policy led ably by John Alty, who oversaw an increase in their department number from 45 at the time of the EU referendum to around 550 this autumn. They will need all that resource as they take on the unprecedented task of establishing the UK’s independent schedules at the WTO, rolling over the current EU third-party trade agreements, establishing new trade agreements, supporting DExEU in its work on a new trade deal with the EU, and putting in place a UK trade remedies regime.

The trade Bill and the customs Bill will provide the necessary framework for the department to carry out that work, and I am wholly supportive of the Government’s approach. The Bills bring to life the Prime Minister’s clearly stated objectives: that Brexit means Brexit and we are leaving the EU; that we will strike a comprehensive free trade agreement with the EU; that we will strike new FTAs with other countries; and that we will avoid a cliff edge for businesses. Although I voted to remain, I can see that the UK, as the world’s fifth-largest economy, is perfectly capable of having a successful, independent trading future. It is clear to me that continued membership of the single market is not consistent with the vote to leave the EU. No fewer than 18 European Trade Ministers told me independently that the four freedoms and single market membership are indivisible—you cannot cherry pick, in their words.

Alternatively, membership of the European Economic Area or the Customs Union will constrain the UK’s economic opportunities around trade. We will be followers on regulation and will be obliged to offer third-party countries the same inward tariffs as Europe negotiates—but will then have to independently negotiate our own export and investment agreements with the same third-party countries, putting UK businesses at a disadvantage.

All of that makes a comprehensive FTA with the EU the most economically literate outcome. Our first step must therefore be to try to maintain what we already have. To ensure that there is no cliff edge and to make things as straightforward as possible for business, the Government plan to set out our independent schedules at the World Trade Organization which will replicate, as closely as possible, our current EU schedules. This will provide continuity for businesses that trade with countries not currently covered by bilateral agreements, such as the USA, China, India and others.

You cannot drop out of the multilateral trading system, and I am sure that the tried and trusted approach of using actual historic usage to determine future tariff rate quotas will be hard to overturn if any appeal is forthcoming. I welcome the Government’s approach to signing the UK up to existing plurilaterals in the WTO such as the GPA. These will continue to provide consistency for UK businesses. I cannot find common cause with those who suggest that we should adopt unilateral tariff reductions at the WTO. While it would undoubtedly reduce the cost and increase the range of goods and services open to consumers, it would produce a damaging shock to a currently underproductive UK economy and make the chances of reciprocal arrangements almost impossible, creating a permanent disadvantage for UK businesses.

Lest we forget, around 75% of all taxes are raised directly or indirectly from business. Its success pays for our schools and hospitals. There is an inextricable link between the success of business and what a society can sustainably afford. That is why I applaud the further consistency of trade that will come from rolling over or grandfathering our current EU third-party FTAs, EPAs and association agreements, as set out in the White Paper.

Following the referendum, I visited 35 countries and met 75 Foreign Ministers. They all agreed that they wanted continuity of trade, and for the existing arrangements to apply post March 2019. They all committed to a process of working to secure that, not wanting a break and to fall back to less favourable WTO terms. I welcome the Government’s continuing support of EU FTAs not yet fully ratified with Canada, Singapore, Japan and Vietnam, and I hope that these, too, can be grandfathered once we have left the EU. There is certainly an appetite for that to happen.

Then there are the new agreements. The Prime Minister has announced nine working groups to explore new FTAs covering 15 countries. They will take time to deliver, post Brexit, but they are real. As I travelled the world, there was an enthusiasm to trade with Great Britain. I welcome the fact that the Government will continue to offer the poorest countries duty-free, quota-free access to the UK and adopt the generalised scheme of preferences for the next tier, as well as grandfathering the existing asymmetric economic partnership agreements in Africa, the Caribbean and the Pacific.

Lastly, I welcome the Prime Minister’s commitment to a transition period to allow time for all these things to fall into place. It is a sign of understanding to business that the challenges as well as the opportunities are recognised. The vision that the Government paint of an open, liberal, free-trading Britain competing on a global scale with reciprocally reduced tariffs and access is economically compelling, but not something that I suspect businesses or employees are yet prepared for. Our productivity needs to increase by around 18 percentage points just to meet the average of the G7 countries—let alone be a global leader. This may not be the vision of Brexit that many voted for, and expectations will need to be carefully managed.

The whole endeavour will not be easy. Many say that it is the most difficult peacetime challenge that we have faced. Some realism as to the scale of the task would be welcome on all sides. However, I see little point in adopting an “I told you so” approach to the inevitable and previously debated challenges of Brexit or in repeating points on how difficult it all is—save in a way to constructively improve our position or to check understanding.

The EU nations have rallied in common cause to enhance their economic position and we should now do the same. Hopefully, having tackled Brexit as swiftly as we can, we can move on to the substantial social issues that this country faces at the beginning of the 21st century: those of fairness for all and how we adjust to benefit successfully from the new digital era.